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Avi is founder of ElliottWaveTrader.net, a live trading room and member forum focusing on Elliott Wave market analysis. Avi emphasizes a comprehensive reading of charts and wave counts that is free of personal bias or predisposition. A lawyer and ... more

Very Bullish Set Up In The Metals Complex

Date: Tuesday, January 31, 2017 10:01 PM EDT

That now has the market set up with two 5-wave structures off the lows struck in December of 2015/January 2016 in the complex.  And, when we have two 5-wave structures off a major low, it increases the probabilities that we are about to embark on an extremely strong rally.

The best recent example I can provide to you would be what occurred in early 2016 in the SPX.  As the market was hitting the lows in early 2016, it also developed two 5-wave structures off its February lows, at which time I implored all those who were still bearish the market to change perspectives, since this was an extraordinarily bullish set up.  In fact, even when we were in the 1900 region, I was suggesting that we likely have begun a rally which was going to take us towards 2300SPX, and potentially even in 2016, as you can see from our analysis from 2016, which is attached below.  We all know what happened since. 

Well, I view the potential set up in the metals complex as no different.  While it certainly is not “guaranteed” that this will occur, as there is nothing guaranteed in our non-linear financial markets, I think the probabilities side with such bullish potential.

Now, on the smaller degree, we have enough waves in place to consider wave (2) of wave 1 of iii as completed as well.  While it can certainly take a little longer to complete a more protracted wave (2), you must be prepared for a break out which will likely occur within the next few weeks, and as early as the coming week.

Last weekend, I provided you with the relevant support levels, above which we must maintain a bullish bias:

The support for such a wave (2) pullback in silver resides between 16.10-16.50. . . As far as the GDX is concerned, our main support resides between 20.50-21.65. . .  In GLD, the relevant support resides between 110.50-112.65.  

So, in the bigger picture, as long as we do not break our support levels, I will be looking for a break out over resistance.  Should we see a strong break out over the highs struck this past week in GDX, as well as silver taking out 17.50, that is our trigger telling us the market is likely heading back up towards the August highs to complete wave 1 of wave iii.  And, since we only deal in probabilities and not absolutes, should we break the cited supports before such break out is seen, it would make me question the potential bullish set up.  But, for now, the market has done exactly what it needs to do to set us up in a larger degree bullish posture.

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